FirstCapital’s Burgess meets with Trump

Chairman invited to White House to discuss challenges community banks face

By Trevor Hawes, thawes@mrt.com

Published
4:49 pm CST, Thursday, March 9, 2017

Midlander Ken Burgess, far left, chairman of FirstCapital Bank of Texas, was among community bankers who met with President Trump on Thursday.

Midlander Ken Burgess, far left, chairman of FirstCapital Bank of Texas, was among community bankers who met with President Trump on Thursday.

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Midlander Ken Burgess, far left, chairman of FirstCapital Bank of Texas, was among community bankers who met with President Trump on Thursday.

Midlander Ken Burgess, far left, chairman of FirstCapital Bank of Texas, was among community bankers who met with President Trump on Thursday.

FirstCapital’s Burgess meets with Trump

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FirstCapital Bank of Texas Chairman Ken Burgess knows the roles community banks play in the areas they serve, but post-Great Recession regulations implemented during the last presidential administration have challenged these small financial institutions. Some have gone out of business.

Burgess, chairman-elect of the American Bankers Association, and a handful of other community bank leaders from across the nation had the ear of President Donald Trump at the White House on Thursday. They talked about how broadly applied regulations have hurt their businesses and the communities they serve. Burgess spoke with the Reporter-Telegram after the session to give his perspective.

MRT: Why did President Trump bring you and other community bankers to the White House?

Burgess: He invited this group of community bankers to visit with him because, as he’s stated over and over again, he’s very concerned about job creation. He realizes the extreme amount of regulation put in place after the financial crisis by the Dodd-Frank Act in 2010, which affected all banks. Small community banks around the country are having to live with the same mountainous burden of regulation that the big banks do.

MRT: How bad has it been?

Burgess: We’ve lost about 30 percent of our banks in the last seven years. That’s taking away community banks’ ability to serve customers in smaller communities. About 50 percent of small business loans made in the United States are made by community banks.

(Trump) realizes how important it is to have a tailored regulatory system. Regulation should fit the size of the bank and its business model so it’s not so overly burdensome and so it doesn’t cause banks to have to merge or go out of business and end up losing community bank support.

MRT: Are there any regulations in particular that are affecting FirstCapital?

Burgess: A lot of the mortgage rules put in place have impacted people they were never intended to impact.

People that are retired and no longer have W-2 income might be able to write a check but can’t qualify to buy a mortgage because of the way the rules are written. The rules skirt the ability to repay loans ... because they don’t have enough W-2 income to support their payments with a pretty good margin of coverage. If you’re retired, have a good income and have significant assets you’ve built up, you can’t qualify for a loan.

The same thing can be said for small business owners. Most small business owners run their business and may take withdrawals out of the company but not take W-2 salary income. If they don’t do that or they haven’t been in business for a long enough period of time, they might be strong financially but not qualify for a mortgage.

MRT: What other major issues have community banks had to contend with?

Burgess: Another point we made to them is the regulations are written with a lot of subjectivity. The regulators who are in charge of administering those rules have quite a bit of leeway in how they administer those. We’re asking them to consider appointing people into the regulatory jobs that are coming up here in a few months to have a more reasonable understanding of how rules impact different sized banks.

Keep the regulatory environment that needs to be there, but don’t administer rules in such a way that you’re wiping out the banking industry.

MRT: How as banking changed?

Burgess: We’ve had three new banks chartered in the U.S. since 2010 because of the regulatory environment. In the past, you would normally see between 100 and 300 new banks every year. That would stem the tide of bank mergers or failures so we wouldn’t lose our banking system.

We need to look at the capital thresholds that are required to start up a new bank in communities like Midland, and smaller ones like Stanton can start a new bank if they had local people who wanted to do that.

When I put together the group and started the bank in 1998, we raised $6.5 million. We would go raise more money as it was needed because of our growth. Now, the minimum threshold is in the $30 million range. Banks in smaller communities can’t raise that amount of money, and if they could, they would have to grow the bank to $300 million to $400 million in assets very quickly to be able to put that money to work and provide a return to shareholders. That’s not feasible.

MRT: How do you think your comments were received?

Burgess: I thought he was extremely receptive to what we were talking about. I was very impressed with how quickly (Trump) would turn to his treasury secretary who was there and another staff member who is in charge of implementing some of these financial regulatory reforms. He would say to them, “Can we get this done with some actions or by getting the right people in place, or does it have to go through the legislature?”

While we were there, he was already talking with them about how to make significant changes that would bring quick action. I’ve always thought he was a person of action, and he definitely showed that at our meeting this morning.

MRT: How important are community banks?

Burgess: Extremely important. They’re the ones that take deposits and redeploy that money into businesses and individuals around the city. Small businesses create the jobs in our community, and they’re relying on capital by raising money themselves or borrowing capital to grow their business and grow jobs. If you don’t have a good community bank with employees who understand the community and go out to get to know the customer, it’s harder for those small businesses to get loans. They’re not publicly traded companies. There’s not a massive amount of information out there.

The bigger banks serve a big need in our economy, but they don’t do as good of a job with small businesses because they can’t get to know the owners and understand some of the nuances of the business that community banks can.

MRT: How is Midland's economy faring?

Burgess: We’re starting to see some signs of improvement as the oil price moves back into the $50 range. As a community bank in Midland, we’re seeing some strengthening in the oil sector, especially with some of the service companies that are starting to work again. We’re pleased to see that and hope it eases some of the pain people have been feeling.